Household Savings Fall and Liabilities Rise in FY24

India’s economic resilience is witnessing a shift as household savings continue to fall and liabilities rise, according to CareEdge Ratings’ latest Economic Pathway June 2025 report. These fiscal dynamics raise concerns about long-term domestic investment capacity and the sustainability of consumption-led growth.

Household Savings Slide to Multi-Year Low

India’s household savings declined for the third consecutive year, reaching just 18.1% of GDP in FY24. This drop is significant given the crucial role household savings play in funding domestic capital formation. In FY15, the overall gross domestic savings stood at 32.2% of GDP. That figure fell to 30.7% in FY24, marking a notable shift in saving behaviour across Indian households.

The fall in savings is attributed to various structural and macroeconomic factors that may include inflationary pressures, changing consumption patterns, and increasing reliance on credit.

Household Liabilities on the Rise

Alongside dipping savings, household financial liabilities have increased substantially. CareEdge noted that gross financial liabilities rose to 6.2% of GDP in FY24, nearly doubling the level registered a decade ago. The surge in liabilities signals a shift towards more credit-based consumption and borrowing among Indian families.

This trend poses implications for financial stability, especially in an economy like India’s that relies heavily on domestic financial participation to drive investments and infrastructure development.

Gross Domestic Savings: An Economic Indicator

Gross domestic savings represent the share of total income not consumed, thereby forming a crucial financial buffer for future investments. The decline to 30.7% of GDP underlines concerns about India’s capacity to self-finance capital-intensive developments, especially when coupled with lower external capital inflows.

CareEdge Ratings highlighted that India’s ability to fund domestic investment from savings is weakening, placing more reliance on public capex and foreign investments.

Read More: India’s GDP Doubles in a Decade to $4.27 Trillion: IMF! 

Real GDP and Nominal GDP Outlook

According to the Union Ministry of Statistics, India’s real GDP (adjusted for inflation) is projected to reach ₹187.97 trillion in FY25, up from ₹176.51 trillion in FY24, indicating a growth of 6.5%. On the other hand, nominal GDP is set to hit ₹330.68 trillion in FY25 from ₹301.23 trillion in FY24, translating to a 9.8% increase. 

These projections reflect steady economic momentum despite subdued household savings and increased liabilities.

Government Capital Expenditure Sees Strong Growth

CareEdge Report also highlighted a rebound in government capital expenditure. The Centre’s capex for FY25 rose to ₹10.5 trillion, surpassing the ₹10.2 trillion revised estimate. Additionally, the start of FY26 has been promising, with 14.3% of the budgeted capex already spent by April.

For FY26, the Centre has allocated ₹11.21 trillion towards capital expenditure—a 10% increase from the previous fiscal. Including special assistance of ₹1.5 trillion to states, effective capital expenditure is projected at ₹15.5 trillion, up from ₹13.18 trillion in FY25.

Effective capex includes outlays used for asset creation, such as rural employment and state infrastructure support.

Trade and Export Dynamics

While overall exports have remained subdued, non-petroleum goods exports marked a 6% growth in FY25, reaching an all-time high of $374.1 billion. This growth was propelled by sectors like electronics (32.5% surge), engineering goods, pharmaceuticals, and textiles.

However, the report estimates show a likely contraction of 0.8% in non-petroleum export growth for FY26 amid global economic slowdowns and trade tensions.

Rural vs Urban Sentiment

The report reveals that rural consumer confidence hovered around the neutral threshold of 100 between September 2023 and May 2025. In contrast, urban consumer confidence remained under this level through the same period.

Favourable agricultural conditions, softening food inflation, and rising rural wages have supported rural demand. Conversely, urban economic sentiment has trailed, possibly influenced by job market uncertainties and inflation in urban living costs.

Conclusion

India’s domestic savings are showing structural stress as FY24 registered a continued decline in household savings to 18.1% of GDP and a rise in financial liabilities to 6.2%. This pattern, coupled with growing public capital expenditure and variable export performance, paints a complex picture for the Indian economy's future investment-driven growth path. The onus partly shifts toward the government to cushion the investment momentum amidst changing household financial behaviour.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.